Investor's Business Daily
By: Paul Sperry
April 1, 2011
Blacks and Hispanics have lost much of the housing gains they made during the Clinton and Bush administration campaigns to boost minority homeownership, new census numbers show.
As a result, the "mortgage gap" between minorities and whites is almost as wide as it was two decades ago, when Washington launched a crusade to close it.
The black homeownership rate plunged in 2010 to a 13-year low of 45% from a housing bubble peak of 49%. The share of Latinos owning a home fell to 48% from a high of 50%. While also down, the rate for whites stood at 74%. Analysts expect rates to keep falling in 2011 and beyond.
"We're definitely heading back down to the bottom, especially when you look at minorities," said Melissa Kresin, a Census Bureau researcher. With home foreclosures and vacancies up again this year, "it's not looking great."
Sadly, affordable-housing policies have backfired on the groups they were designed to help.
In 1995, President Clinton unveiled his National Homeownership Strategy to push black homeownership above 50%. After he pressured banks and Fannie Mae and Freddie Mac to ease lending rules for low-income minorities, black ownership rates shot up to record levels.
The media at the time attributed the growth to the "first real enforcement of the Community Reinvestment Act," an anti-discrimination law regulating mortgage lending. "Our homeownership strategy will not cost the taxpayers one extra cent," Clinton promised during a White House ceremony attended by Acorn officials.
From Lima To A Loan
President Bush poured fuel on the subprime fire that Clinton lit with his own program targeting Hispanic immigrants. In 2001, he challenged the housing industry to help add 5.5 million minority homeowners over the decade. He worked to "dismantle barriers" to Latinos qualifying for mortgages, such as bilingual education and a lack of down payments.
"You can imagine somebody newly arrived from Peru looking at all that print and saying, "I'm not sure I can possibly understand that,' " Bush said. He urged Fannie and Freddie to continue Clinton-era programs "to help deserving families who have bad credit qualify for home loans."
Due in large part to these policies, minorities accounted for nearly half the growth in homeownership from 1995 to 2005, a Harvard University study found.
The artificially induced demand fed a subprime bubble that eventually burst. As home prices cratered, minority ownership rates proved unsustainable.
By pushing uncreditworthy minorities into homes they ultimately could not afford, the government did them no favors. The "revolution in affordable housing," as HUD called it in 2004, made victims of the very people it was intended to help -- the underprivileged.
Widespread foreclosures have drained some $350 billion in wealth from communities of color -- more than triple the damage the Gulf states suffered from Hurricane Katrina. While the nation endured a recession, these areas have suffered a depression. Easy credit has transformed good neighborhoods into bad ones, and bad neighborhoods into a blight of boarded-up vacancies.
While well-intentioned, Washington's housing policies turned the American Dream into a nightmare for many minorities and devastated the entire housing sector.
But Washington hasn't learned its lesson. President Obama continues to raise the "affordable housing" banner, while blaming "greedy" banks for minority foreclosures. He seeks to expand the CRA to help close the now-yawning racial "wealth gap."
On that front, Attorney General Eric Holder is suing banks for alleged "predatory lending" in minority areas. Already, his civil-rights chief, Tom Perez, has ordered several banks to pay millions of dollars in settlements, while guaranteeing prime mortgages to African-Americans -- including those on "public assistance" -- to "repair some of the damage done to communities."
Predatory lending "is a practice that occurred all too often during the past decade, and stripped a vast amount of wealth from communities of color," Perez said in announcing a $2 million settlement with PrimeLending in December. "We will continue aggressively to pursue compensation for the victims."